Bank charges ruling - what does it mean?

Posted in 'Banking' by Barry Stamp

05 March 2009

A massive surge of new claims against banks by consumers is now expected to take place.

This has been prompted by continued adverse publicity for banks, combined with the outcome of a Court of Appeal decision on 26 February, which has been hailed as a significant victory for the Office of Fair Trading (OFT). In essence, the Court of Appeal agrees with the OFT’s assertion that the charges imposed by banks, for returned cheques and direct debits and for going over an agreed overdraft limit, are unfair because they are excessive.

The banks are likely to appeal to the House of Lords, mostly to gain time and also because the sums involved are very large indeed. Claims vary, but can typically be in the region of £800 or more, as the law enables consumers to base a claim going back over 6 years, and tens of thousands of claims have already been lodged.

When charges were first challenged as being unfair and excessive, the banks reduced many fees to £12, (which some still find excessive for the simple act of sending a letter out), so the quicker a claim is put in, the higher the claim is likely to be.

At the moment, if a claim is lodged, the courts have said that the banks need not respond until the outcome of the current OFT case is known, but that should not stop anyone from making a claim.

Despite this, some claims are reported to have been settled in a matter of months, but some banks will routinely reject any claim as a matter of course, and this can deter many. These will not move until they are faced with court proceedings.

Other consumers find the whole thing an adventure and are guided by campaigning websites such as the Consumer Action Group and others to take the DIY option. The Consumer Action Group even publishes a list of successful claims from each named bank to encourage others.

Several firms have also sprung up offering to do all the work for you. The things to look for, if you use one of these, are:

• no upfront fee charged
• no win, no fee payable
• the commission rate varies considerably, from 10% to 25% of your successful claim, so shop around
• some are solicitors, which give you the protection of the Legal Complaints Service if things go wrong

If you have been aggrieved by being over-charged on several occasions over the past six years for going over your limit, then the time may now be right to join the tens of thousands of others who have fought back against unfair charges and won.

If you wish to tell us more about your bank, so we can use your feedback to guide others on which banks give great service, and which do not, please complete our Banking and Credit Card Survey. It only takes 2 minutes, and you can enter our draw to win one of 3 great must-have prizes - your choice of either a new second generation 32GB Apple New iPod Touch, or an Archos 5 250GB Internet Media Tablet, or a Compaq Mini 702EA PC Netbook.

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